Teladoc shares slump as cost woes at mental health unit prompt forecast withdrawal

Teladoc Health

01/08/2024 12:42

Aug 1 (Reuters) - Teladoc Health's  TDOC.N  shares
tumbled 18% before the bell on Thursday, as surging costs and
declining revenue in its mental health services unit forced the
virtual healthcare provider to withdraw its annual and long-term
forecasts.
    The company recorded a $790 million impairment charge
related to BetterHelp in the second quarter and flagged a
double-digit increase in customer acquisition expenses from last
quarter. 
    After several years of growth, boosted in part by the
increased demand for virtual medical services during the
pandemic, Teladoc is undergoing what some analysts called a
"strategic reset" under the leadership of its recently hired CEO
Chuck Divita.
    "Teladoc has become a victim of its own success and finds
itself at a crossroads as it explores the next phase of growth,"
Oppenheimer analyst Michael Wiederhorn said.
    Higher advertising costs for BetterHelp have also hampered
the telehealth provider's growth in the United States.
    Resilience and profitability of Integrated Care, Teladoc's
chronic care unit, should be the focus of CEO Divita's strategic
shift, Michael Cherny, analyst at Leerink Partners, wrote in a
note titled 'BetterHelp Needs Some Help'.
    BetterHelp services are offered directly to consumers on its
platform and through some partnerships with employer groups.
    Teladoc said on Wednesday it was assessing if it could offer
services for the platform through more contracts with health
insurers and employer groups.
    A potential sale of the segment could also be a path
forward, said Barclays analyst Stephanie Davis.
    At least five brokerages cut their price targets on Teladoc
stock. Its median price target is currently at $11, implying a
17% premium to its last close, according to LSEG data.
    The stock has declined nearly 60% so far in 2024 and is on
track to post a fall for the fourth straight year. Shares of the
company had hit a high of $253 in 2020.

 (Reporting by Bhanvi Satija in Bengaluru; Editing by Shilpi
Majumdar)
 ((Bhanvi.Satija@thomsonreuters.com; Outside U.S. +91
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